International Accounting Standard No. 16International Accounting .pdf

International Accounting Standard No. 16:
International Accounting Standard No. 16 provides that property, plant and equipment can be
accounted for under the cost method or the revaluation method.
Under the Cost model of accounting the property, plant and equipment, an item of property, plant
and equipment should initially be recorded at cost. Cost includes all costs necessary to bring the
asset to working condition for its intended use. This would include not only its original purchase
price but also costs of site preparation, delivery and handling, installation, related professional
fees for architects and engineers, and the estimated cost of dismantling and removing the asset
and restoring the site.If payment for an item of property, plant, and equipment is deferred,
interest at a market rate must be recognised or imputed.
If an asset is acquired in exchange for another asset (whether similar or dissimilar in nature), the
cost will be measured at the fair value unless (a) the exchange transaction lacks commercial
substance or (b) the fair value of neither the asset received nor the asset given up is reliably
measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying
amount of the asset given up.
Under the revaluation model, revaluations should be carried out regularly, so that the carrying
amount of an asset does not differ materially from its fair value at the balance sheet date.
If an item is revalued, the entire class of assets to which that asset belongs should be revalued.
If a revaluation results in an increase in value, it should be credited to other comprehensive
income and accumulated in equity under the heading \"revaluation surplus\" unless it represents
the reversal of a revaluation decrease of the same asset previously recognised as an expense, in
which case it should be recognised in profit or loss.
A decrease arising as a result of a revaluation should be recognised as an expense to the extent
that it exceeds any amount previously credited to the revaluation surplus relating to the same
asset.
When a revalued asset is disposed of, any revaluation surplus may be transferred directly to
retained earnings, or it may be left in equity under the heading revaluation surplus. The transfer
to retained earnings should not be made through profit or loss.
Solution
International Accounting Standard No. 16:
International Accounting Standard No. 16 provides that property, plant and equipment can be
accounted for under the cost method or the revaluation method.
Under the Cost model of accounting the property, plant and equipment, an item of property, plant
and equipment should initially be recorded at cost. Cost includes all costs necessary to bring the
asset to working condition for its intended use. This would include not only its original purchase
price but also costs of site preparation, delivery and handling, installation, related professional
fees for architects and engineers, and the estimat.

1. International Accounting Standard No. 16:
International Accounting Standard No. 16 provides that property, plant and equipment can be
accounted for under the cost method or the revaluation method.
Under the Cost model of accounting the property, plant and equipment, an item of property, plant
and equipment should initially be recorded at cost. Cost includes all costs necessary to bring the
asset to working condition for its intended use. This would include not only its original purchase
price but also costs of site preparation, delivery and handling, installation, related professional
fees for architects and engineers, and the estimated cost of dismantling and removing the asset
and restoring the site.If payment for an item of property, plant, and equipment is deferred,
interest at a market rate must be recognised or imputed.
If an asset is acquired in exchange for another asset (whether similar or dissimilar in nature), the
cost will be measured at the fair value unless (a) the exchange transaction lacks commercial
substance or (b) the fair value of neither the asset received nor the asset given up is reliably
measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying
amount of the asset given up.
Under the revaluation model, revaluations should be carried out regularly, so that the carrying
amount of an asset does not differ materially from its fair value at the balance sheet date.
If an item is revalued, the entire class of assets to which that asset belongs should be revalued.
If a revaluation results in an increase in value, it should be credited to other comprehensive
income and accumulated in equity under the heading \"revaluation surplus\" unless it represents
the reversal of a revaluation decrease of the same asset previously recognised as an expense, in
which case it should be recognised in profit or loss.
A decrease arising as a result of a revaluation should be recognised as an expense to the extent
that it exceeds any amount previously credited to the revaluation surplus relating to the same
asset.
When a revalued asset is disposed of, any revaluation surplus may be transferred directly to
retained earnings, or it may be left in equity under the heading revaluation surplus. The transfer
to retained earnings should not be made through profit or loss.

Solution

International Accounting Standard No. 16:
International Accounting Standard No. 16 provides that property, plant and equipment can be
accounted for under the cost method or the revaluation method.
Under the Cost model of accounting the property, plant and equipment, an item of property, plant

2. and equipment should initially be recorded at cost. Cost includes all costs necessary to bring the
asset to working condition for its intended use. This would include not only its original purchase
price but also costs of site preparation, delivery and handling, installation, related professional
fees for architects and engineers, and the estimated cost of dismantling and removing the asset
and restoring the site.If payment for an item of property, plant, and equipment is deferred,
interest at a market rate must be recognised or imputed.
If an asset is acquired in exchange for another asset (whether similar or dissimilar in nature), the
cost will be measured at the fair value unless (a) the exchange transaction lacks commercial
substance or (b) the fair value of neither the asset received nor the asset given up is reliably
measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying
amount of the asset given up.
Under the revaluation model, revaluations should be carried out regularly, so that the carrying
amount of an asset does not differ materially from its fair value at the balance sheet date.
If an item is revalued, the entire class of assets to which that asset belongs should be revalued.
If a revaluation results in an increase in value, it should be credited to other comprehensive
income and accumulated in equity under the heading \"revaluation surplus\" unless it represents
the reversal of a revaluation decrease of the same asset previously recognised as an expense, in
which case it should be recognised in profit or loss.
A decrease arising as a result of a revaluation should be recognised as an expense to the extent
that it exceeds any amount previously credited to the revaluation surplus relating to the same
asset.
When a revalued asset is disposed of, any revaluation surplus may be transferred directly to
retained earnings, or it may be left in equity under the heading revaluation surplus. The transfer
to retained earnings should not be made through profit or loss.